Read the following cases. Select two of the cases and state whether the action or situation shows...

Read the following cases. Select two of the cases and state
whether the action or situation shows a violation, or potential
violation, of the AICPA Code of Professional Conduct. Explain why
and cite the relevant rule or interpretation. As a class, let’s be
sure to answer all the different cases. •Certified public account
(CPA), Sal Colt, has discovered a way to eliminate most of the
boring work of processing routine accounts receivable confirmations
by contracting with the Cohen Mail Service. After the auditor has
prepared the confirmations, Cohen stuffs them in envelopes, mails
them, receives the return replies, opens the replies, and returns
them to Colt. •Without consulting Jora Cramer, its CPA, Cadentoe
Corporation has changed its accounting so that it is not in
conformity with the Generally Accepted Accounting Principles
(GAAP). During the regular audit engagement, Cramer discovers that
the statements based on the accounts are so grossly misleading that
they might be considered fraudulent. Cramer resigns the engagement
after a heated argument. Cramer knows that the statements will be
given to Sandy Panzer, a friend at the Last National Bank, and that
Panzer is not a very astute reader of the complicated financial
statements. Two day later, Panzer calls Cramer and asks some
general questions about Cadentoe’s statements and remarks favorably
on the very thing that is misrepresented. Cramer corrects the
erroneous analysis and Panzer is very much surprised. •A CPA who
had reached retirement age arranged to sell the practice to another
certified public accountant. Their agreement called for the review
of all audit documentation and business correspondence by the
accountant purchasing the practice. •Martha Jacoby, CPA, withdrew
from the audit of Harvard Company after discovering irregularities
in Harvard’s income tax returns. One week later, Jacoby received a
phone call from Jake Henry, CPA, who explained that he had just
been retained by Harvard Company to replace her. Henry asked Jacoby
why she withdrew from the Harvard engagement, and she told him.
•Chen Wallace, CPA, has two audit clients: Willingham Corporation
owned by Jayden Willingham, and Ward Corporation owned by Bailey
Ward. Willingham Corp. sells a large proportion of its products to
Ward Corp., which amounts to 60 percent of Ward Corp.’s purchases
in most years. Willingham and Ward are also Wallace’s tax clients
as individuals. This year, while preparing Ward’s tax return,
Wallace discovered information that suggested Ward Corporation is
in a failing financial position. In consideration of the fact that
the companies and individuals are mutual clients, Wallace discussed
Ward Corporation’s financial difficulties with Willingham. •Ashley
Fiddle, CPA, prepared an uncontested claim for a tax refund on
Faddle Corporation’s amended tax return. The fee for the service
was 30 percent of the amount the IRS rules to be a proper refund.
The claim was for $300,000. •After Faddle had won a $200,000 refund
and Fiddle collected $60,000 fee, Jordan Faddle the president,
invited Fiddle to be the auditor for Faddle Corporation. •Burgess
Company engaged Kim Philby, CPA, to audit Maclean Corporation in
connection with a possible initial public offering (IPO) of stock
registered with the Security and Exchange Commission (SEC). Burgess
Company established a holding company named Cairncross Inc. and
asked Philby to issue an engagement letter addressed to Cairncross
stating that Cairncross would receive the auditors’ report.
Caricross has no assets and Philby agreed to charge a fee for the
audit of Maclean only if the IPO is successful.

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